T-Mobile Watches Customers (and Profits) Depart

by Matt Klassen on February 28, 2011

Although one of America’s four horseman of the wireless world, T-Mobile has perpetually found itself firmly ensconced in that number four position, last among the leaders; virtually treading water as the other carriers build their empires on the backs of the iPhone (minus Sprint of course) and other strong smartphone offerings.

But amidst a marketing campaign that boasts the best 4G coverage in America (but honestly,  who doesn’t make such a claim?), it looks like the reality of T-Mobile’s spotty network coverage and the growing scarcity of the requisite spectrum needed to handle data intensive video and mobile apps has finally caught to the company.

In its Q4 2010 financial statement released late last week (PDF), T-Mobile reported disappointing results, as its increasingly anaemic growth has finally turned into outright losses for the company. In fact, T-Mobile saw its first ever overall loss of customers as an astounding 318,000 contract customers decided to take their business elsewhere.

So can T-Mobile reverse its fading fortunes? All I know is its going to take more than a good looking woman in a candy cane coloured dress to do so.

T-Mobile finds itself in an increasing tight spot. The only one of the four major American carriers to lose customers in Q4 last year, the company is facing increasing pressure for all sides. Not only is T-Mobile struggling to keep pace with AT&T and Verizon, both of whom now have the iPhone in their line-up, it’s market position means that it has to contend with smaller carriers like MetroPCS as well, the smaller fish that are continually pushing to usurp that final spot in the top four.

On the face of it though, T-Mobile’s situation really doesn’t look that bad. While it did lose 318,000 contract customers, it did replace them with 295,000 prepaid customers, for only a net loss of 23,000. But the reality is that much a wireless company’s profits comes from its contract subscribers, with significantly less income generated from prepaid phones. This means that while only a net total of 23,000 customers left, a whole lot more revenue left with them.

So why the mass exodus of contract customers? For starters, it seems like there’s some lingering confidence issues in T-Mobile’s overall network. It was no secret that T-Mobile was late to the 3G party, lagging behind much of the rest of the industry when upgrading its network capabilities. Now with every major wireless carrier rolling out its next gen 4G network, there is a sense that T-Mobile, despite it advertising, will again let down its customers in the near future.

Beyond that, there is little question that T-Mobile’s smartphone line-up is the most disappointing of the top four. Not only is there no iPhone to help boost sales, but T-Mobile has struggled to attract the more popular Android phones as well. Further, it doesn’t look like T-Mobile even has anything remotely attractive on the horizon that it could use to lock customers in to those profitable long term contracts.

So can T-Mobile start to attract customers back? The reality is, unless T-Mobile looks to establish some strategic partnerships with other carriers, a lack of wireless spectrum and attractive devices means that this drop in customers is merely a sign of increasingly troubled waters ahead.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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